Thornhill v. Donnkenny, Inc.
| Decision Date | 14 July 1987 |
| Docket Number | Nos. 86-3531,86-3605 and 86-3606,s. 86-3531 |
| Citation | 823 F.2d 782 |
| Parties | Glenn O. THORNHILL, Plaintiff-Appellee, v. DONNKENNY, INC., Defendant-Appellant. Galax Apparel Corporation, Defendant-Appellee, and Al Paris; Murray Nadler; Cummings & Carroll, P.C.; H.B. Carroll; DK Investors, Inc., Defendant, v. OPPENHEIMER & CO.; Oppenheimer & Co., Inc., Third Party Defendant. Glenn O. THORNHILL, Plaintiff-Appellant, v. DONNKENNY, INC., Defendant-Appellee, and Al Paris; Murray Nadler; Cummings & Carroll, P.C.; H.B. Carroll; Galax Apparel Corporation; DK Investors, Inc., Defendant, v. OPPENHEIMER & CO.; Oppenheimer & Co., Inc., Third Party Defendant. Glenn O. THORNHILL, Plaintiff-Appellee, v. DONNKENNY, INC., Defendant-Appellant, Galax Apparel Corporation, Defendant-Appellee, and Al PARIS; Murray Nadler; Cummings & Carroll, P.C.; H.B. Carroll; DK Investors, Inc., Defendant, v. OPPENHEIMER & CO.; Oppenheimer & Co., Inc. Third Party Defendant. Glenn O. THORNHILL, Plaintiff-Appellant, v. DONNKENNY, INC., Defendant-Appellee, and Al Paris; Murray Nadler; Cummings & Carroll, P.C.; H.B. Carroll; Galax Apparel Corporation; DK Investors, Inc., Defendant, v. OPPENHEIMER & CO.; Oppenheimer & Co., Inc., Third Party Defendant. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Gerald A. Novack (Peter B. Fallon; Eric T. Schneiderman; Melissa A. Cohen; Barrett, Smith, Schapiro, Simon & Armstrong, New York City, S.D. Roberts Moore; Jane S. Glenn; Gentry, Locke, Rakes & Moore, Roanoke, Va., on brief), for plaintiff-appellant.
William B. Poff (William P. Wallace, Jr.; Woods, Rogers & Hazelgrove; Roanoke, Va., John L. O'Donnell; Peter Aron; Robert L. Hoegle; Alan T. Gallantry; Olwine, Connelly, Chase, O'Donnell & Weyher, New York City, on brief), for defendant-appellee.
Before PHILLIPS, WILKINSON and MURNAGHAN, Circuit Judges.
This is a suit brought in state court by an individual against his former employer. The action was removed to federal court on the basis of diversity of citizenship jurisdiction. 28 U.S.C. Secs. 1332, 1441. The plaintiff, Glenn O. Thornhill, and the defendant Donnkenny, Inc., appeal from different portions of a judgment entered after a jury trial by the United States District Court for the Western District of Virginia.
We affirm judgment in favor of plaintiff ("Thornhill") on both his breach of contract claim and the breach of fiduciary duty counterclaim of defendant ("Donnkenny, Inc."). However, we reverse the district court's denial of prejudgment interest on Thornhill's breach of contract claim. Thornhill is entitled to prejudgment interest in whatever amount is appropriate under New York law. We also reverse the district court's entry of judgment in Thornhill's favor on his "malicious termination" claim. We therefore affirm in part, reverse in part, and remand for the entry of an appropriate judgment. On remand the district court also shall dispose of Thornhill's stayed motion for attorneys' fees and expenses in whatever manner is appropriate and consistent with this opinion.
From January 1977 to August 1981, the period in issue in this action, Donnkenny, Inc. made clothing to be sold under its own and others' labels. Donnkenny, Inc. also contracted out both kinds of work in many instances.
Donnkenny, Inc.'s manufacturing facilities were located in western Virginia. Thornhill, a director and officer (Treasurer) of the corporation, was in immediate charge of the facilities. All other corporate directors and officers worked in the New York area.
In November 1978 Oppenheimer & Co. (a New York-based investment banking firm) and certain other institutional investors, through a holding company, purchased substantially all of the assets of Donnkenny, Inc. They took over the name and business of Donnkenny, Inc.
On November 30, 1978, Thornhill and four other members of Donnkenny, Inc.'s pre-acquisition management, including its President, Murray Nadler ("Nadler"), executed with the "new" corporation a "Partnership and Management Agreement." The agreement largely provided that the individuals would continue to manage the corporation.
On November 30, 1978, Donnkenny, Inc. also entered into employment contracts with Nadler and Thornhill. Nadler and the corporation executed a five-year contract keeping him in the post of President. Thornhill entered into a seven-year contract for his position as Treasurer.
Thornhill's contract provided in part that:
[Thornhill] may continue his affiliation with such other business organizations with which he was affiliated at the time this Agreement was entered into. [Thornhill] agrees, however, not to engage in any new or other business or commercial activity, other than personal investment activities during the term of this Agreement. [Thornhill] further agrees that for a period of two years after the termination of his employment by the Company, he will not engage in any business or commercial activity, except those in which he was engaged at the date this Agreement was entered into, which competes either directly or indirectly with the Company.
At the time of the agreement, November 30, 1978, Thornhill or other management personnel had for many years contracted out work from Donnkenny, Inc. to clothing manufacturing facilities in which Thornhill or members of his family had ownership interests. Thornhill or others continued to contract out substantial amounts of work to those facilities after Thornhill entered into the employment contract. The other facilities also competed with Donnkenny, Inc. for some work for other labels. 1
After the 1978 acquisition Thornhill and Nadler, who also had been a director of the corporation, remained on its Board of Directors, along with another member of Donnkenny, Inc.'s prior management, Executive Vice President Leslie A. Saul. The four remaining spots were filled by representatives of Oppenheimer & Co.
Donnkenny, Inc.'s financial status declined after 1978. In 1981 the corporation sought out new equity investors. Al Paris and two other persons agreed to purchase an equity interest and to become involved in the corporation's management.
On August 12, 1981, Al Paris and one of his co-investors replaced Nadler and Thornhill as members of the Board of Directors. Nadler and Thornhill also were replaced as President and Treasurer of the corporation on or about that date. Thornhill continued to manage Donnkenny, Inc.'s manufacturing facilities.
On August 31, 1981, Al Paris went to the manufacturing facilities and spoke with Thornhill. After an argument (that Al Paris may have deliberately instigated) Al Paris fired Thornhill.
Both before and after the 1978 takeover, Thornhill made some disclosure to other members of the Board of Directors and other officers of the corporation that he or other management personnel contracted out work to plants in which Thornhill or members of his family had ownership interests, and that those plants sometimes competed with the corporation. That is why Thornhill's employment contract contained an explicit provision permitting his continuing affiliation with other businesses.
Thornhill filed the instant suit in state court two days after he was fired. The case was removed to the United States District Court for the Western District of Virginia. Count I of Thornhill's Amended Complaint alleges breach of contract. Count II of the Amended Complaint alleges a conspiracy between Donnkenny, Inc. and other entities and persons to fire Thornhill without adequate cause. Count II alleges in part that Thornhill was fired maliciously. Thornhill pleaded no other claims. Donnkenny, Inc. filed a counterclaim against Thornhill for breach of fiduciary duty. Certain other businesses and persons were made parties to the litigation but the claims against them are not on appeal.
The action went to trial before a jury and was submitted on special verdicts. The jury found for Thornhill for breach of contract in the amount of $280,000. The jury found for Donnkenny, Inc. on Thornhill's conspiracy claim. The jury found for Thornhill for "malicious termination" in the amount of $1,000,000. The jury found for Thornhill on Donnkenny, Inc.'s breach of fiduciary duty counterclaim.
The district court entered judgment accordingly. The district court denied Donnkenny, Inc.'s motion for judgment n.o.v. or, alternatively, a new trial, on the breach of contract claim and the breach of fiduciary duty counterclaim. The district court denied Thornhill's motion for prejudgment interest on his breach of contract claim. The district court also denied Donnkenny, Inc.'s motion for judgment n.o.v. on Thornhill's "malicious termination" claim. Finally, the district court stayed Thornhill's motion for attorneys' fees and expenses pending resolution of the appeal.
Donnkenny, Inc. contends on appeal that it is entitled to judgment n.o.v. or, in the alternative, a new trial, on Thornhill's breach of contract claim and its breach of fiduciary duty counterclaim. Donnkenny, Inc. argues that it is entitled to judgment n.o.v. in both instances on the theory that Thornhill breached his fiduciary duty as a matter of law. Donnkenny, Inc. argues alternatively that it is entitled to a new trial on the claim and counterclaim either because the verdicts were against the clear weight of the evidence or because the jury was not properly instructed.
At various points the parties have argued that Virginia, Delaware or New York substantive law governs disposition of the claim and counterclaim in this diversity of citizenship action. We need not reach the issue at this point because it is clear that sufficient evidence was adduced by Thornhill to justify the verdicts in his favor on the claim and counterclaim whichever of these three states' laws applies.
Judgment n.o.v. may not be granted lightly. Falwell v. Flynt, 797 F.2d 1270, 1276 (4th Cir.1986) () ("We may reverse a...
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